Nam Tai Q2 sales down 7%, but gross profit margin improves to 11.5%, EPS up 107%

Nam Tai Electronics, Inc. ("Nam Tai" or the "Company") (NYSE Symbol: NTE - News) today announced its unaudited results for the second quarter and six months ended June 30, 2007.

SECOND QUARTER REVIEW
Sales in the second quarter dropped 7% as compared to the same quarter last year from a decline in business from telecommunication components assembly ("TCA"). This product segment is dependent on demand in the mobile phone market and one of our indirect customers suffered a substantial drop in sales volume in its mobile devices business in Asia and Europe. Thus, we and other participants in the mobile phone supply chain were inevitably affected. On a sequential basis, our total revenue still improved by about 3% from the first quarter mainly from growth in both our LCD products ("LCDP") and consumer electronics and communication products ("CECP") segments, with especially strong demand for our headsets containing Bluetooth® wireless technology* and home entertainment products.

Net sales in the second quarter of 2007 were $197.8 million, a decrease of 7.4% as compared to $213.7 million in the second quarter of 2006. Gross profit in the second quarter of 2007 was $22.7 million, an increase of 9.5% as compared to $20.8 million in the same period last year. Operating income in the second quarter of 2007 was $11.8 million, or $0.26 per share (diluted), a decrease of 41.0% as compared to operating income of $20.0 million, or $0.46 per share (diluted) for the same period last year. Net income in the second quarter of 2007 was $38.8 million, an increase of 109.5% as compared to $18.5 million in the second quarter of 2006. Basic and diluted earnings per share in the second quarter of 2007 were both at $0.87 per share, an increase of 107.1% as compared to $0.42 per share for both basic and diluted earnings per share in the same period last year.

Non-GAAP operating income in the second quarter of 2007 was $11.8 million, or $0.26 per share (diluted), an increase of 10.3% as compared to non-GAAP operating income of $10.7 million, or $0.25 per share (diluted) for the same period last year. Non-GAAP net income in the second quarter of 2007 was $8.6 million or $0.19 per share (diluted), a decrease of 18.1% as compared to $10.5 million, or $0.24 per share (diluted), in the second quarter of 2006.

The Company's financial position remains strong and net cash provided by operating activities in the second quarter of 2007 was $28.7 million. The Company ended the quarter with $268.3 million cash on hand even after capital expenditures of $5.7 million and first quarter dividends of $9.4 million paid to shareholders on April 21, 2007.

COMPANY OUTLOOK
The second quarter of 2007 was still difficult for Nam Tai as the same business environment that we discussed in our announcement of first quarter financial results continued into the second quarter. The competitive environment remains intense and we expect resulting pricing pressures from customers to remain a significant challenge for the electronics manufacturing services industry in the coming quarters and years. Additionally, the Company would also have to deal with difficulties such as appreciation of Renminbi, shortage of electricity supply and increases in overhead expenses resulting from general inflation. We are working hard to stabilize our results by improving efficiencies, broadening our product offerings and diversifying our customer base. Initial evidence from our performance in the second quarter, showing gross profit margin rebounding to 11.5%, supports management confidence of the Company's future profitability.

Recently, Nam Tai began manufacturing FLY Fusion(TM) Pentop Computers(*), a new product for a customer new to Nam Tai, LF Leapfrog Enterprises, Inc ("Leapfrog"). Leapfrog is a leading company in designing and developing educational products for children. The Company is also providing manufacturing services for another new customer, a leading Japanese company, in manufacturing 1.3 mega pixel CMOS image sensor modules for notebook computers. Additionally, apart from the strategy to produce high value and more sophisticated products, Nam Tai plans to continue to seek to negotiate better terms from suppliers and to control expenses in an effort to enhance our operating margins.

In furtherance of our previously announced expansion projects, our development of new production facilities, in Shenzhen Guangming Hi-Tech Industrial Park, or Shenzhen Guangming, People's Republic of China (the "PRC"), in which an approximate $1.5 million deposit was paid in 2006, we paid an additional $0.7 million deposit in June of this year for the land acquisition cost in Shenzhen, with the remaining balance of approximately $6.7 million to be paid upon further notification by the PRC government around the end of 2007. As to our planned facility in Wuxi, Jiangsu Province of the PRC approximately 80 miles Northwest of Shanghai, we are accelerating the implementation of this expansion project with the support of the local government of Wuxi in an effort to overcome limitations on existing available facilities. We are currently working with our architect on the design of manufacturing facilities and believe that these additional facilities, when operational, will position us to meet our forecasts of customers' demands and market requirements in the next few years. In turn, we expect to resume both higher growth in sales and profitability in the long term.